Do you own overseas property? Have you let it out for more than 70 days per annum? If so it may now qualify as a Furnished Holiday Let (FHL).
What difference will this make?
If you presently (or have done so during the previous 2 tax years) rent out accommodation as a qualifying holiday let in the European Economic Area (EEA) and it meets all of the criteria it will make a big difference. Until the 6 April 2010 the income will be taxed as FHL property income, which will mean that:
- you can set off FHL losses against other income and obtain a tax refund
- you can claim capital allowances for the purchases of furniture and equipment reducing the profit and tax payable or increasing the loss and tax repayable, and
- you will benefit from significant capital gains tax reliefs including roll-over and entrepreneurs' relief if you dispose of FHL properties before 5 April 2010.
What are the downsides?
- As always change has negative effects, if you own a FHL in the UK that currently qualifies as a FHL property under the present rules, this will revert to being taxed as normal property income from 6 April 2010 and the relief above will be lost.
What's next?
If you feel that you may be affected by these changes please call us on 01509 267827 as we should meet and discuss this as soon as possible. The most immediate deadline is to apply for a late change to your 2007 self assessment tax return if it needs to be changed; this has to be done by 31 July 2009. (If you have operated your FHL trade through a company, amendments to tax computations for accounting periods ending on or after 31 December 2006 have to be submitted by the same date, 31 July 2009.)
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